Japan Air Seeks $8.4 Billion in Top IPO Since Facebook
Japan Airlines Co. will seek as much as 663 billion yen ($8.4 billion) in the largest initial public offering since Facebook Inc. (FB), capping a state-backed turnaround since it filed for bankruptcy protection in 2010.
Shares will be on offer at a price range of 3,500 yen to 3,790 yen, according to a statement today. That’s in line with the indicative price of 3,790 yen announced earlier this month. The carrier won’t get any of the sale proceeds as the 175 million shares are being sold by its government-backed parent.
JAL will be priced at about five times forecast earnings, compared with 16 times for All Nippon Airways Co. (9202), Japan’s largest carrier. The company is returning to the Tokyo stock exchange after shedding a third of its workforce, scrapping routes and retiring older planes in a restructuring that returned it to profit.
“JAL is attractive compared with ANA,” said Mitsushige Akino, who oversees the equivalent of about $600 million in assets in Tokyo at Ichiyoshi Investment Management Co. “It’s come out of a turnaround and slashed debts, so it’s in a good position.”
The final price for the IPO, Japan’s second-biggest in more than a decade, will be set on Sept. 10, according to the earlier statement. The shares will begin trading Sept. 19. JAL will surpass ANA as Japan’s biggest carrier by market value and as the fourth largest worldwide behind Latam Airlines Group SA, Singapore Airlines Ltd. and Air China Ltd.
ANA fell 0.6 percent to 177 yen in Tokyo trading. The carrier, which also announced a share sale last month, has fallen 18 percent this year, compared with a 6.3 percent gain for the Nikkei 225 Stock Average.
JAL is returning to the stock market after a two-year turnaround in bankruptcy protection that transformed it into the world’s most profitable airline. The government drafted in Kazuo Inamori, the founder of electronics company Kyocera Corp. (6971), to oversee the restructuring.
The plan was supported by a 350 billion yen investment from state-backed Enterprise Initiative Turnaround Corp. of Japan. The fund, which can only invest in companies for three years, is selling its 97 percent stake in the IPO. It will get back more than it invested, Inamori, who is now JAL’s chairman emeritus, has said.
Companies have raised more than 130 billion yen in 24 priced IPOs in Japan this year, led by Activia Properties Inc. (3279)’s 94.3 billion yen sale in May. That’s little changed from a year earlier, according to data compiled by Bloomberg. Facebook raised $16 billion in its New York IPO in May. The shares have since fallen about 50 percent from the sale price.
JAL posted a record profit of 187 billion yen in the year ended March more than twice that of Air China, the most profitable listed carrier worldwide, according to data compiled by Bloomberg. The airline is predicting a profit of 130 billion yen this fiscal year, compared with 40 billion yen at ANA.
JAL has benefited from tax credits against past writedowns, which have prompted complaints from opposition lawmakers.
ANA and JAL are both facing new competition in Japan from three discount carriers that have started flights this year. JAL owns a stake in one, Jetstar Japan Co., while the other two are part-owned by Tokyo-based ANA.
The three newcomers all filled about 90 percent of domestic seats during this month’s peak holiday season. JAL and ANA both had load factors of less than 80 percent for flights within the country, and both reported declines from a year earlier.
“If LCCs really becomes a sustainable business, then that would put pricing pressure on legacy carriers,” said Tomofumi Noguchi, a Tokyo-based analyst at Credit Suisse Group AG. “That would be negative for stock prices.”
The new low-cost carriers are also lessening the appeal of discount flight vouchers that JAL has pledged to give retail shareholders because their fares may still be cheaper. The new airlines have advertised prices about a third the cost of JAL and ANA’s fares.
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